Now that Mylan and Pfizer’s Upjohn established medicine business have officially combined to become Viatris, CEO Michael Goettler has laid out a growth roadmap for the new company which involves “disciplined” deal-making.
Viatris management will keep a close eye on “the discipline around capital investment opportunities” as the two companies integrate, Goettler said at the annual J.P. Morgan Healthcare event.
Goettler touted Viatris’ commercial presence, manufacturing strength and global supply network, as well as its medical, regulatory and development capabilities, which are now offered to potential partners as a platform.
But right now, Viatris’ near-term plan—which covers the next three to four years—is focused on stabilizing the business and investing in its own pipeline, he said.
That means cutting costs—an effort that’ll involve chopping 20% of the combined businesses’ 45,000-strong workforce. The aim is to save $1 billion annually by laying off workers and closing, downsizing or selling up to 15 manufacturing facilities.
Meanwhile, Viatris plans to use its cash to pay down debt, pay out dividends and cover the roughly $1 billion to $1.3 billion in costs associated with layoffs.
And that means no deals that require a lot of up-front cash, Goettler said.
Goettler said his team is working to make 2021 a “trough year” for Viatris, followed by a few years of flat revenue. Its top-selling pain med Lyrica is facing early generic competition in Japan despite an ongoing patent dispute. And China’s forever-growing volume-based procurement (VBP) scheme, which is designed to further lower the price of off-patent drugs, is also hitting the legacy Upjohn business hard.
A strong presence in China had been featured as a key rationale for Mylan’s purchase of Upjohn. The company now fully understands the VBP but expects some decline in China as it washes through its system, Goettler said.
China is a key growth opportunity for Viatris over the long term, but it’s still only 10% of its business right now, Goettler pointed out, adding that it can absorb the initial VBP-caused decline. Part of that will come from introducing legacy Mylan’s portfolio to the Chinese market, and Goettler said his team has identified more than two dozens such products.
“We have adapted very quickly and very well to the volume-based procurement impact, we … rightsized hospital business but invested in the retail space,” Goettler said. The retail space—which is shielded from VBP and is more self-pay—now represents more than one-third of Viatris’ China business and is growing at over 20%, he said.
Goettler painted Viatris as a partner of choice in China. “We have an absolute premium infrastructure in China that can promote in multiple channels—hospital, retail and digital—has deep reach in the country not just in top cities, has deep knowledge and deep relationships; we have local manufacturing and international quality standards and also the highest compliance standards,” he said.
RBC Capital Markets analyst Randall Stanicky recently pointed out that M&A is the way to go for Viatris to achieve further growth. Goettler admitted that the company has a “natural erosion” phase that needs to be compensated by not just internal R&D but dealmaking.
A lot of that will come in the second phase of Goettler’s blueprint, in which the company will have more financial flexibility and more free cash flow to strike deals.